Reserve Bank of India (RBI) Governor Raghuram Rajan has once again stressed the need for strengthening urban cooperative Banks in the country in order to beat the phenomenon of uneven recovery in Indian economy.
The RBI Governor said, since small banks tend to be more comfortable in lending to small entrepreneurs, we need to strengthen regional rural banks (RRBs) and urban cooperative banks.
Urban cooperative banks numbering more than 1700 are spread across the country and are helping the poor and marginal segments of population with small loans. Cooperative leaders have often accused the RBI of not giving UCBs their due.
Rajan seems to have grasped the role being played by UCBs in the economy and insisted on the need to streamline their functioning in a major way.
Earlier, the patron of Sahakar Bharati Satish Marathe has written a letter to the RBI Governor to review the working of UCBs, DCCs and Apex Banks and prepare a Vision Document with a Roadmap for growth and development of the Co-operative Banking Sector.
Based on the experience of the last few years, initiate steps to modify provisions of MOUs between the RBI/NABARD and the State Govts to improve governance and to reduce intervention of State Govts, Marathe demanded.
He also felt the need for amendments in the Banking Regulation Act so it could more effectively develop and regulate the Cooperative Banking Sector.
The cooperative banking sector should equally benefit from the changes being ushered in, in the Financial and Banking Sector so that it could play a major role in achieving equitable and sustainable growth through financial inclusion, he suggested to the RBI Governor.
Earlier, speaking in Bhopal RBI governor Raghuram Rajan had called for streamlining of cooperative banks. Talking at Odisha Knowledge Hub lecture series Rajan said lending to micro enterprises as a proportion to the GDP has risen to 7.7 per cent, from six per cent in 2012. Stressing the need for the ease of entry and exit, Rajan welcomed the proposed Bankruptcy Code, stating it will allow the stressed firms to exit and new ones to come up.
Rajan said sectors such as auto are doing quite well but agriculture needs to pick up after being hit by two successive droughts. The RBI has been engaging with banks, constantly asking them to bring down lending rates so that customers can benefit.
“Jobs are created by small & medium enterprises (SMEs) that grow into large enterprises. In order to create these kinds of start-ups, four to five conditions are needed — ease to enter and exit, access to input and output markets, protection of property rights, making the whole process of enterprise politically viable and creating a safety net for the employees of start-ups,” Rajan underlined.